Superintendent Peter Routledge participates in National Bank Annual Conference 2026 fireside chat

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Moderator:

Globally, we're seeing signs of recalibration in bank capital frameworks. How should we think about the future direction of capital standards — both internationally and here in Canada?

Superintendent Peter Routledge:

• For roughly 15 years following the Global Financial Crisis, the global policy direction was to strengthen capital and liquidity buffers. That was necessary. After the stress episodes in 2023, including bank failures abroad, the Canadian system performed well. That suggests the long post-crisis tightening cycle has largely achieved its objective, and the focus can now shift to disciplined fine-tuning rather than continued broad tightening.
• Our large banks' CET1 ratios remain well above supervisory expectation, and the system has demonstrated resilience through COVID, geopolitical shocks, and market volatility. That resilience gives us room to examine whether certain elements of the framework may be overly conservative or outdated — without compromising prudential soundness.
• Where evidence supports it, we have consulted on targeted capital recalibration, including lower risk weights for certain SME exposures and adjustments related to infrastructure investment by life insurers, now extended to the P&C sector. The direction in Canada is careful calibration: maintaining strong guardrails while ensuring capital supports productive lending and long-term growth.
• Also, OSFI has adopted a deliberate regulatory modernization approach by removing over 600 pages (total English and French) of redundant, outdated or trivial information from our guidance library and consolidating requirements where appropriate over the last couple of years. This proactive discipline of regulatory efficiency helps clarify expectations and concentrates supervisory attention where it matters, not deregulation.

Moderator:

You’ve previously suggested that industry engagement on regulatory reform is most effective when it’s coordinated and focused on shared priorities. Have you seen meaningful progress in that direction?

Superintendent Peter Routledge:

• Coordinated engagement is always more constructive than firm-by-firm lobbying. When proposals are advanced through industry associations, they tend to reflect broader system interests rather than individual competitive advantages.
• That approach allows us to assess ideas through a prudential lens while ensuring changes are equitable across institutions and do not unintentionally distort competition.
• A good recent example was the work on adjustments to the standardized capital approach. Industry associations brought forward concrete, technically grounded proposals that we were able to assess efficiently and implement where evidence supported it.
• When engagement is coordinated, data-driven, and aligned around shared priorities, it improves the quality of policy outcomes and creates more predictability for the system as a whole.

Moderator:

To what extent can capital requirements be adjusted to support economic priorities without undermining financial resilience?

Superintendent Peter Routledge:

• Our starting point is prudential risk. Capital requirements exist to ensure institutions can absorb losses and continue lending through stress. That objective does not change. Financial resilience is not optional — it is foundational.
• That said, over time we have accumulated increasingly granular and risk-sensitive rules. It's important to step back and assess the cumulative effect of those requirements. We need to ask whether the framework remains aligned with underlying risk and whether it is unintentionally shaping credit allocation in ways that may not reflect economic fundamentals.
• For example, if certain business lending exposures consistently attract materially higher capital intensity than residential real estate, we have to examine whether that differential fully reflects relative risk. Our role is not to favor sectors, but to ensure capital standards are evidence-based, risk-sensitive, and not inadvertently discouraging productive lending.

Moderator:

Financial institutions have adapted successfully to past technological shifts. What distinguishes the current wave of digitalization and AI-driven disruption, if anything, from earlier periods of innovation?

Superintendent Peter Routledge:

• Financial institutions have successfully navigated many waves of technological change, from digital banking to cloud computing. What distinguishes the current moment is the speed and scale at which technologies like artificial intelligence are being adopted, and how quickly they can reshape decision-making across entire institutions.
• When it comes to new technologies like artificial intelligence, OSFI’s starting point is “first, do no harm.” We are not looking to regulate innovation prematurely—we didn’t regulate telephones or spreadsheets when they emerged. Instead, we are allowing institutions to innovate while we stay closely engaged, observe how the technology is being used, and step in only when risks are better understood and clearly material.
• To better understand how artificial intelligence is being adopted across the financial sector, OSFI is actively engaging with industry through initiatives like the Financial Industry Forum on Artificial Intelligence, led by the Global Risk Institute. This work helps us assess emerging risks—such as model use, governance, and oversight—while maintaining a measured, evidence-based approach to any future regulatory response.
• AI also introduces new forms of integrity and security risk. These tools can enhance productivity and risk management, but they can also be used by bad actors to generate sophisticated fraud, manipulate information, or exploit vulnerabilities. That means institutions need strong governance, controls, and human oversight as these technologies are deployed.
• From a supervisory perspective, our approach is not to slow innovation but to ensure it occurs within a framework of sound risk management. Institutions that succeed in this environment will be those that combine technological capability with strong governance, resilience, and a clear understanding of the risks these tools introduce.

Moderator:

OSFI recently streamlined its new entry regime for fintechs and credit unions. What was the objective behind those changes? And how do you balance encouraging competition with preserving prudential strength across the system?

Superintendent Peter Routledge:

• Canada’s financial system is evolving. New business models are emerging and there is growing demand for competition. The objective of updating our approvals process is to ensure OSFI’s framework remains responsive, transparent, and predictable — while maintaining strong prudential oversight.
• We are developing a targeted fast-track approvals framework for eligible new entrants, initially focused on credit unions and entities with innovative or emerging banking models. We’re revamping our approvals process, trying to significantly shorten our approval. Once we have a firm and full application, we’ll move to processing and get our recommendation to the Minister within that 12-month cycle. The approach is structured and risk-based, with earlier identification of supervisory issues and clearer service standards. The goal is efficiency and clarity — not lower standards.

• Competition and prudential strength are not opposing objectives. We will never compromise on high prudential standards. Our mandate remains to support stability, soundness, integrity and security. A disciplined, modernized licensing process allows credible new entrants to compete and take reasonable risks, while ensuring the resilience of the system as a whole.

Moderator:

How do you assess current housing market risks, particularly in light of rising delinquency rates?

Superintendent Peter Routledge:

• We’re watching housing closely because it remains the largest exposure for the banking system. Delinquencies have moved up from exceptionally low levels, but they are still, in most cases, returning toward more normal ranges rather than signaling a system-wide deterioration on their own.
• The more important story is distributional: a cohort of borrowers who took mortgages in 2021–2022 is facing meaningful payment resets on renewal, and some variable-rate, fixed-payment borrowers have seen amortizations extend and balances remain elevated. That can create household stress even if it doesn’t threaten system resilience.
• From a system perspective, our assessment remains that banks have the capital, liquidity, and underwriting discipline to absorb higher losses if conditions soften further. The supervisory focus is ensuring institutions remain proactive with higher-risk segments, maintain sound underwriting and account maintenance and collateral practices, and continue lending through the cycle.

Moderator:

Recent developments in U.S. private credit markets have raised questions about liquidity and redemption risk. How do you view Canadian banks’ exposure — particularly where they provide financing or liquidity support to private credit funds?

Superintendent Peter Routledge:

• We pay close attention to the growth of private credit globally, but our supervisory focus is Canadian institutions and the channels through which stress could transmit into the regulated system.
• In Canada, banks’ direct credit exposure to private credit funds is generally modest relative to overall lending. The more important supervisory question is contingent exposure — liquidity facilities, funding commitments, or backstop arrangements that could be drawn during market stress.

• We assess whether those commitments are structured prudently: how they are collateralized, how they are risk-weighted, how concentration is managed, and whether the institution has sufficient liquidity buffers to meet potential drawdowns without creating funding strain. Stress behavior matters more than normal-period assumptions.
• More broadly, as credit intermediation shifts outside the regulated perimeter, the resilience of the core system depends on disciplined risk governance. Our expectation is that Canadian banks understand their exposures, price liquidity appropriately, and manage interconnectedness so that stress in one segment does not become systemic.

Moderator:

The use of synthetic risk transfer transactions and private credit has increased globally in recent years. How does OSFI view this trend, particularly in the Canadian context?

Superintendent Peter Routledge:

• Globally, we’re seeing more credit intermediation happening outside traditional balance sheets, including private credit and synthetic risk transfer structures. Our starting point is not to resist innovation, but to ensure we understand where risk ultimately resides and how it could transmit back into the regulated system under stress.
• In the Canadian context, one lens is bank exposure to private credit channels—directly and indirectly—and whether commitments made into that ecosystem behave differently under stress than expected. A key concern is situations where exposures look well-collateralized in good times but prove less resilient when conditions tighten, potentially amplifying a credit crunch or earnings strain.
• With synthetic risk transfer transactions, the key issue is substance over form. We assess whether risk is genuinely transferred, whether the structure is robust under adverse conditions, and whether capital relief reflects the true economics of the transaction. Well-structured transactions are entirely consistent with the framework; the focus is on ensuring they behave as intended in a downturn.
• Stepping back, we also have to be alert to unintended incentives in the capital framework that can shape credit allocation. If risk weights and internal models systematically make it easier to lend against housing than to SMEs, that can contribute to an unbalanced mix in the economy. It isn’t OSFI’s role to direct capital flows, but it is our responsibility to ensure the framework is risk-sensitive, evidence-based, and not unintentionally distorting lending decisions.

Moderator:

How does your assessment differ when it comes to Canadian life insurers, particularly given their long-standing exposure to private placement debt within their general funds?

Superintendent Peter Routledge:

• A growing proportion of insurer investments are linked to private markets – private credit, private equity, infrastructure, and real estate. The risks associated with private investments are not new to the insurance industry. That said, given the opacity and potential illiquidity associated with private investment, such investments require more rigorous analysis by insurers than required with other investment exposures.
• Recent private capital-linked defaults in the U.S. have reinforced the importance of robust risk management practices.
• We are engaging insurers to better understand their exposures to private investments as well as their risk management practices for these types of investments. In the coming year, we will prioritize supervisory reviews in this area.

Moderator:

Looking ahead, what regulatory or supervisory developments should we be watching in the life insurance sector?

Superintendent Peter Routledge:

• Canada's life insurance capital framework is well established and has proven resilient through multiple cycles.
• Looking ahead, our focus will remain on ensuring capital and risk management frameworks keep pace with evolving investment strategies and emerging risks. That includes areas such as credit risk management, asset valuation practices, and governance around increasingly complex investment structures.
• We are updating regulatory returns for insurers to align with the new IFRS 18 Presentation and Disclosure in Financial Statements standard. The updates introduce operating, investing, and financing categories to the statement of profit or loss. These changes promote greater consistency and comparability of regulatory reporting across life insurers. We provided some regulatory relief to the life insurance sector by deferring the annual Life Insurance Capital Adequacy Test (LICAT) update by one year, to give institutions more time to adjust to the evolving economic environment.
• More broadly, we will continue to monitor how insurers adapt their business models and investment portfolios in a changing economic environment, while ensuring the sector maintains the strong capital and risk discipline that has long characterized the Canadian life insurance system.